What to know about federal student loans for college students

CHICOPEE, Mass. (WWLP) – Many students need to take out federal student loans to help pay their way through their college careers.

Loans are one of the main ways that students fund their college education, along with scholarships and grants. A loan is money that you borrow and must pay back with interest, according to Federal Student Aid. It is important to understand that a loan is a legal obligation that makes you responsible for repaying the amount that you borrowed with interest.

If you need to apply for financial aid, you might be offered loans as part of your university’s financial aid offer. The U.S. Department of Education’s federal student loan program is the William D. Ford Federal Direct Loan (Direct Loan) Program, where four different types of loans are available.

Direct Subsidized Loans are given to eligible undergraduate students who demonstrate financial need to help pay for higher education at a college or a career school. Direct Unsubsidized Loans are made to eligible undergraduate, graduate, and professional students, but the eligibility is not based on financial need. Direct PLUS Loans are made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses that are not covered by any other financial aid. The eligibility for this loan is not based on financial need, but a credit check is required. Direct Consolidation Loans allow you to combine your eligible federal student loans into a single loan with just a single loan servicer.

If you are an undergraduate student, the most amount of money that you can borrow each year in Direct Subsidized Loans and Direct Unsubsidized Loans can range from $5,500 to $12,500 per year, depending on what year you are in school, as well as your dependency status.

If you are a graduate or a professional student, you can borrow up to $20,500 each year in Direct Unsubsidized Loans. Direct PLUS Loans can be used for the remainder of your college costs, as determined by your school that is not covered by other financial aid.

To apply for a federal student loan, you must complete and submit a Free Application for Federal Student Aid (FAFSA^®) form. Based on the results, your college or career school will send you a financial aid offer which might include federal student loans.

If you just graduated college or a career school, your federal student loans go into repayment. If you have any Direct Subsidized, Direct Unsubsidized, or Federal Family Education Loans, you have a six-month grace period before you need to start making payments. PLUS loans do not have a grace period, but if you did receive a PLUS loan as a graduate or professional student, you will get a six-month deferment after you graduate, leave school, or drop below half-time enrollment. 

Your loan servicer will give you a loan repayment schedule that tells you when your first payment is due, the number and frequency of payments, and the amount you need to pay for each payment.

You can always make payments before they are due or you can even pay more than the amount that is due each month. Paying a little extra each month can help to reduce the interest you pay and can reduce the total cost of your loan over time.

The amount you need to pay each month depends on your repayment plan. If you signed up for electronic communication, pay close attention to your email, because most loan servicers will send an email when your billing statement is ready for you to access online.